Lean Manufacturing & Enterprise News Update

Zero Defects And On-Time Deliveries.

2006-09-23T05:24:00.000+08:00

Charles Bates
09/19/2006

Turning Inc. has not had a customer return a defective part in more than ten years, and it has not missed a job delivery date since the company opened its doors 22 years ago.

"Jobs are done right and on time," says Toby Miller, president. "If a customer receives a bad part, that gives the shop's image a black-eye, and we can't have that because the bulk of our jobs come from word-of-mouth."

Job volumes vary from one to 10,000 parts, with the average being about 2,000 parts per job. Typical job lead times run 30 days, and the shop fulfils, on average, around 140 purchase orders monthly. Most jobs involve turning, especially small diameters, which the shop specializes in, and parts ranging in size from 0.187 in. to 1.500-in. in diameter. Miller says the key is in-process quality checking that rarely adds to a part's cycle time because it is done during cutting time. In the rare occasions when in-process checking does add to a part's cycle time, Miller says the amount is miniscule as compared with the time the customer would waste shipping back the part and his guys then reworking it.

Turning Inc. is not perfect and sometimes scraps a part, but the shop catches them at the machines, mainly because these are first-run parts used to set up the job. "For the first piece of a job, we adjust the machine offsets out about 0.005 in. so we know the part won't come off undersize. We then check it and re-adjust the offsets accordingly," says Miller. "This may add a little time to cutting the first part, but we are not going to scrap a part just to set up the job."

The shop also focuses on cycle times and uses a lot of fixturing for holding multiple parts. "If we can reduce part cycle times by just 5 percent, that's 5 percent that allows me to keep from having to raise prices so I can remain competitive," says Miller. "We try to never raise prices, so our profits increase solely by doing jobs more efficiently all the time."

Miller says he bases his success on experience, having a skilled staff and keeping abreast of the latest manufacturing technology. "You can't do tomorrow's work on yesterday's equipment," says Miller. And he expects to install the shop's first multitasking millturn machine by next year and will incorporate off-line programming.

Within five years, Miller said he should have two mill-turn machines and will continue to focus heavily on turning jobs. He foresees no problems with keeping the machines supplied with work because the shop is currently operating at full capacity. In fact, the shop is expanding its existing facility this year to avoid having to turn work away.

Turning Inc. Jasper, Ga. Number of employees — 5
2006 sales — $505,000 and climbing
Markets served — Aerospace, automotive , and safety (breathing apparatus for firefighters and U.S. military)

The Little Things Count

2006-09-23T04:14:00.000+08:00

Charles Bates
09/19/2006

A pre-staged job on a mobile cart and the deburring department at SPM.

THREE YEARS AGO, SPM CORP.'S BUSIness changed dramatically, going from long production runs to doing several different jobs on a daily basis. To adapt and survive in what became a hectic manufacturing environment, the shop initiated lean manufacturing principles and techniques. In doing so, it realized that getting lean did not involve spending large amounts of cash, but hinged on the simple things.

At SPM, supplying ample tooling and pre-staging jobs slashed setup times, on average, by half. Purchasing a better quality of gloves and regulating detergent levels eliminated waste and the requirement of washing parts twice. Upgrading deburring stations and re-arranging the scrap area improved working conditions and streamlined production flow. Establishing better communication between the first and second shifts led to better organized jobs and relieved shop-floor bottlenecks.

SPM now runs jobs with volumes of 5 to 20 parts, compared with its previous job volumes of 100 or more parts, and ships 150 to 200 jobs per month. Setups are more critical for the company than they ever were.

Prior to incorporating lean tactics, machine operators would stop setup work constantly to search for Allen wrenches and to wait for the tool-holders they needed but were being used on other jobs. "We didn't have enough Allen wrenches and toolholders, it was as plain as that," says Sam Hopp, SPM president. The shop now pre-stages jobs on mobile carts that include the latest versions of part processes and programs, all necessary tooling and part materials.

Hopp says lean manufacturing means driving unproductive practices out of manufacturing processes. For example: The shop spent a little extra money on high quality gloves and eliminated the time and cost involved with having to wash parts a second time. Lower quality gloves that were previously used allowed oil from the wearer's skin to penetrate to part surfaces.

"For the deburring area, simply upgrading overhead lighting and adding ventilated tables sent productivity in that department through the roof," says Hopp. Employees no longer needed to wear respirators and they experienced less eye strain because they could see what they were doing, and work quality improved.

SPM second-shift employees start their shift at noon, so first and second shift setup guys talk to each other about which jobs are done, which need set up and which are ready to run, says Hopp. "Instead of the first shift guy rushing for the door and the second shift guy grabbing a cup of coffee before his shift starts, they are working together to solve production problems and holdups," he says. "Everyone comes to work with 'lean' in the backs of their minds, so each day they approach their jobs with the thought of doing them better and focusing on ways to eliminate waste and speed productivity."

Lean Manufacturing Techniques Produce Results At Ingersoll-Rand's Hussmann Corp.

2006-09-23T03:55:00.000+08:00

Lean techniques reduce inventory, eliminate stock-outs and cut freight/material handling costs.

By Ashley Stirrup, CEO, Ultriva, Inc.
Sept. 13, 2006 -- Creating the refrigeration systems for the supermarkets, convenience and specialty stores, commercial/industrial applications and food service applications is a complicated manufacturing process, and one that is at the core of the business of Hussmann Corporation, an Ingersoll-Rand company.

The diverse nature of the product and its manufacturing process at one Hussmann facility required raw materials purchased by Hussmann to be sent to an outside processor, which created challenges for inventory management and control. Those challenges resulted in regular stock-outs and were negatively impacting on-time deliveries to customers.

To address these issues, Hussmann's commitment to lean manufacturing led it to explore the application of kanban principles well beyond its own facilities. By implementing electronic kanban, which automates and enhances the manual kanban manufacturing approach pioneered by Toyota, Hussmann gained visibility into its inventory levels at its outside processor. Additionally, this pull-based system reduced inventory, ended stock-outs, reduced lead-times and opened up floor space previously used for inventory storage.

Company Profile

An Ingersoll-Rand company, Hussmann manufactures, sells, installs and services its merchandising equipment and refrigeration systems to customers in over 80 countries. The company manufactures and sells refrigerated display cases, other refrigerated and non-refrigerated systems including beverage coolers, walk-in storage coolers and air handlers. Hussmann serves several key markets involved in the food industry, including supermarkets, convenience and specialty stores, foodservice and commercial and industrial applications (which include cold storage warehouses and processing plants).

The Challenge

The more than one million-square-foot Hussmann facility at Bridgeton, Mo., faced problems with inventory management and control. With approximately 25 production lines and several work centers, including Coil & Tube, Lighting, Pace & Wedge (for custom work), Minster, and Welding, Hussmann targeted several areas for improvement.

Hussmann was experiencing one to five stock-outs per week in its high-volume sheet metal operations. Every refrigeration system produced had slightly different dimensions requiring a wide variety of steel sheets, which in turn were used to create the casings. These stock-outs were having a significant negative impact on on-time deliveries.

Hussmann was purchasing steel coils from one supplier, storing the coils on site and then shipping them to an outside processor to slit the steel into various cut sheet sizes. Correctly determining when to order more steel coils, when to ship the steel coils from Hussmann to their outside processor and when and what steel sheets to order was a very complex, manual process. The limited visibility into its outside processor's inventory levels forced Hussmann to rely on frequent calls and emails that were prone to inaccurate data.

The Solution

Hussmann implemented a combination of lean scheduling and electronic kanban applications. With the lean scheduling product, Hussmann's production forecasts were used to automatically calculate Hussmann's steel sheet requirements and then send the appropriate orders to Hussmann's outside processor. Hussmann also set up electronic kanban between the outside processor and Hussmann's steel provider, giving Hussmann real-time visibility into the outside processor's steel coil inventory. Re-order signals are now automatically generated as material is consumed. Through these automatic signals, Hussmann's steel supplier receives order signals much more quickly than before when planners had to manually calculate their steel requirements. Since re-ordering now happens more quickly and accurately, stock-out situations have been eliminated.

With these improvements in visibility and ordering, Hussmann eliminated its inventory of steel coils, freeing up a substantial amount of inventory floor space. In all, Hussmann's implementation of lean scheduling and electronic kanban has resulted in more than $1 million in inventory reductions.

Sheet Metal Results

The successful implementation of software applications within its steel operations resulted in the following benefits for Hussmann:

No stock-outs in the 12 months following implementation compared to one to five per week prior to Ultriva deployment.

Shorter supplier lead times and smaller lot sizes drove the Sheet Metal operations inventory reduction, where inventory was reduced by $300,000 and necessary floor space for inventory was reduced by 20%.

Significantly reduced material handling costs through shipping efficiency improvements.

Additional Details To The More Than $1 Million In Overall Inventory Reduction At The Plant Include:

- In the Coils & Tubes Workcenter, Hussmann realized savings of $150,000 in inventory and eliminated stock-outs, which used to occur four to five times a week.
Lead times were reduced with several suppliers. In one example, lead time was reduced from 15 to five days.

- Supplier replenishment became more predictable and efficient, reducing expediting charges significantly.

- Tedious weekend audits of the manual kanban system were also no longer necessary after implementing Ultriva Electronic Kanban.

- Barcode scanning and COPICS ERP integration eliminated time consuming and error prone data entry, which was replaced with a single scan, saving 1.5 minutes per item.

- Improved inventory visibility within COPICS lead to the elimination of tedious manual stock checks.

Squeezing the fat from health care

2006-09-23T03:03:00.000+08:00

Hospital finds that Lean Management improves efficiency and patient care
By Hanah Cho
Sun reporter

Originally published September 17, 2006
At St. Agnes Hospital in Baltimore, heart attack patients are receiving faster treatment.Doctors, nurses and other hospital staff recently slashed by 22 percent the time it takes for an angioplasty to begin after the patient's arrival in the emergency room. Instead of 119 minutes, patients wait roughly 93 minutes. It's an important improvement, given studies that have linked faster treatment with a lower mortality rate, and the state requires 80 percent of patients to be treated within two hours.

To be more efficient, St. Agnes staff members are employing a practice known as Lean Management to cut costs, reduce patient waiting times and improve safety.Perfected by automaker Toyota, Lean Management is among the variety of techniques promoted by consultants and used by corporate America in an effort to improve work flow and trim expenses. In recent years, Lean has reached hospitals such as St. Agnes and others as health care professionals have tried to contain rising medical costs."We're learning to see the waste and taking it out," said Bill Greskovich, St. Agnes' vice president of operations and chief information officer.Workers may remember theories such as Total Quality Management, Six Sigma, re-engineering and other business techniques that use flow charts, problem solving and role playing to help make their organizations more effective.Each theory was promoted as the latest "it" tool to cut waste and improve operations. For instance, Six Sigma was pioneered at Motorola and gained popularity in the 1990s when former General Electric Chief Executive Officer Jack Welch adopted the practice at the company. (Six Sigma is still part of GE's culture.)

Too trendy But such management theories also have gained a reputation among some experts and workers for being too trendy or imposing cookie-cutter administration on workplaces.Experts say such practices can work, but they should not be considered a cure-all.In some cases, they fail because of poor implementation or lack of resources. In turn, workers get frustrated and fear job cuts as companies cycle through such management practices. Several hospitals, such as St. Agnes, do not lay off workers. Instead, workers are typically redeployed throughout the organization.Lean Management tries to create the smoothest work flow possible by cutting unnecessary steps in work processes and using teamwork to identify and fix problems as they happen. Its roots date back to when Toyota and other Japanese companies learned many of the techniques from W. Edwards Deming, the late American statistician who worked in Japan after World War II.The automaker transformed Deming's insights into its own. When Toyota became a manufacturing powerhouse in the United States in the 1980s, other companies followed its lead.

At other industries Besides Toyota, about 36 percent of U.S. manufacturers identified Lean as their primary improvement method, according to the 2005 IndustryWeek/Manufacturing Performance Institute Census of Manufacturers. Those companies included DuPont and Alcoa.DuPont, for instance, uses Lean and Six Sigma concepts, the company said. And U.S. Army Materiel Command, which develops weapon systems and maintains and provides equipment, said Lean has helped it increase productivity and lower costs.The growing price tag for health care helped create a Lean wave among hospitals a few years ago.But some health care management experts say that some hospitals - like corporations - have gone through numerous quality improvement methods, only to abandon them for the latest management program. As a result, the impact of such practices on hospital operations and patient satisfaction has been minimal, some experts say."You start doing it and you'll do it for a couple of years. If you don't see results, organizations drop it and go on to the next step," said Lawton R. Burns, director of University of Pennsylvania's Wharton Center for Health Management and Economics."The average U.S. corporation spends two years in Total Quality Management. The average Japanese firm spends 30 years. They take a much longer perspective. They invest the time and money to make it work. That's what's lacking in the U.S.," Burns said.

He added, "Hospital executives need to watch out and don't fall into those traps."

Some find success

Some hospitals, however, have found success in Lean, according to a 2005 report by the Institute for Healthcare Improvement, a nonprofit group in Cambridge, Mass.

In one case study, ThedaCare Inc., a Wisconsin-based health system with three hospitals, reported several positive results, including $3.3 million in savings in 2004.

Diane Miller, a director at the institute who edited the research paper, said other quality improvement methods have faded away in the past, but Lean's "early results are not just about costs, but really about driving the waste out and freeing staff to do good stuff."

St. Agnes executives acknowledge that they have tried other methods to improve quality during the past decade with a "mixed bag of success," said Greskovich, the hospital's vice president. But they say Lean Management works because it creates a culture of continual improvement and engages employees to find solutions.

"It's top-down commitment and bottom-up solution development," Greskovich said.

St. Agnes is paying consultants $300,000 to train employees in Lean concepts. Executives, however, expect Lean to become everyday practice at the hospital without outside help in the near future.

Since implementing Lean in March 2005, St. Agnes has saved $600,000 in hard dollars and an additional $5 million in soft costs related to cutting down on waiting time or unnecessary steps, hospital officials said. And exit surveys, they said, have found that employees feel empowered.

More than 10 percent of the hospital's 3,000 employees have participated in weeklong events in which they meticulously map out certain procedures - say, patient turnover time for a gastric bypass surgery - and trim unnecessary steps.

An intensive process
It's an intensive process in which every step is questioned. At an event in March, eight members of the radiology team dissected the process involved for an in-patient to receive a CT scan from the time the doctor writes the order. Yellow notes identifying each step were plastered on the walls of the team's meeting room.

By the end of the week, the team reduced the process from 96 minutes to 45 minutes.

In the examination of ways to speed up emergency angioplasties, a procedure using a tiny balloon to clear blocked blood vessels, team members made several changes in April, including adding parking spaces for heart attack patients and creating a questionnaire to speed up registration.

Sharon Ackerman, director of imaging, whose department has undergone several changes, said it is easy to get defensive about how a process or procedure works, but "there is just different ways to do things and you try to find the best way."

She and other hospital executives acknowledge that some doctors, nurses and staff are initially skeptical of Lean, while others have been resistant to change. But Ackerman said hospital employees become supporters once they see the positive results as well as management's commitment.

"If they see things get fixed during the week, it's easier to buy into it," she said. "They see results."

Hospital executives say uncertainty also is softened by a no-layoff policy. Instead, workers are redeployed as needed.

'Part of solution'
"They're part of the solution," said Bonnie Phipps, president and chief executive officer of St. Agnes. "That's much more effective than it being an edict from above. We've said all along that no one is going to lose their jobs over this. This makes it comfortable to make change."

In the end, St. Agnes executives say their efforts benefit the patients.

"From the patient's eyes, things translate into 'Did I have good care or did I not have good care?'" Greskovich said. "We'll see patient satisfaction climb because of Lean."

Columbia Aircraft Puts Bend Factory On A Diet

2006-09-12T21:50:00.000+08:00

Thu, 07 Sep '06

Adopts Lean Manufacturing Practices
Columbia Aircraft Manufacturing Corporation told ANN Wednesday of further improvements in the manufacturing processes at its Bend, OR factory -- that will enable the company to maintain its current production volume and improve ROI.

By relying on established and proven Lean Manufacturing practices, Columbia will be able to reduce the amount of time required to manufacture an aircraft and gain some relief from inflationary pressures resultant from rising costs for energy, raw materials and components.

"The decision to adopt Lean Manufacturing principles was made 12 months ago," stated Bing Lantis, president & CEO of Columbia. "However the short-term need to rapidly increase production in order to meet growing demand and reduce the backlog superseded the Lean initiative."

This meant adding more production employees, increasing the footprint of the manufacturing facility & increasing inventories. That phase is complete and daily production volume is commensurate with demand. Now a Lean Manufacturing team will help Columbia improve efficiency across all manufacturing operations.

Numerous changes will occur in the coming months, as Columbia adopts Lean Principles that focus on improving manufacturing and on-time customer deliveries.

"We expect the Lean process to produce significant financial benefits and manufacturing efficiencies over the next 12 - 18 months without sacrificing the high quality product and customer experience that are hallmarks of Columbia Aircraft," Lantis added.

Columbia sales increased 350% in the 2006 calendar year compared to 2005 -- and the backlog rests at a comfortable 90 days. "Our business is strong, our backlog is solid and it’s time to shift our focus internally to determine how we can be a more efficient manufacturing company," Lantis concluded.

Columbia manufactures a variety of all-composite aircraft including the world’s fastest certified piston single -– the Columbia 400. The Columbia 350, 350i, 350SL and 350SLX are normally aspirated, four-place aircraft with a cruise speed of 191 knots. The Columbia 400, 400i, 400SL and 400SLX are intercooled, twin-turbocharged, four-place aircraft certified to FL250 with a cruise speed of 235 knots.

What's Driving Toyota?

2006-09-12T19:27:00.000+08:00

September 5, 2006

By Mel Duvall
In the heart of Kentucky, amid rolling bluegrass hills and miles of neat white plank fences, sits the machine that threatens the three pillars of Detroit.

Under the roof of Toyota Motor's largest manufacturing facility in North America, the headlights flash and the horn blasts on a new Camry, Avalon or Solara rolling off the assembly line every 55 seconds. Its journey began just 20 hours earlier, when sheets were cut from a 24-ton coil of steel and stamped by giant machines into body parts. Robots weld the stamped parts into the naked frame of car bodies, which are then hung on an overhead conveyor system to begin a Disney-like ride through 7.5 million square feet of factory floor (the equivalent of 156 football fields).

Employees—some 7,000 at this plant alone—have exactly 55 seconds to install engine components, brakes, dashboards, windows, doors or some other piece of the car puzzle before it is transported to the next stage of the assembly line on the overhead conveyor. Driverless carts ferry parts just-in-time to assembly stations so inventory doesn't pile up, and everywhere, overhead signs, plasma screens and musical jingles alert team leaders to production status or problems on the assembly line.

In the wake of recalls and other quality issues, the company last month said that it was looking at possibly delaying some models. Still, what Toyota has accomplished over the years has been widely admired by manufacturing and information-technology experts.

In factories around the globe, from Toyota City, Japan, to this one in Georgetown, Ky., Toyota consistently produces higher-quality cars, with fewer worker-hours, lower inventory and fewer defects, than any other competitor. The engine behind its success, say insiders and outsiders alike, is the Toyota Production System (TPS), a set of principles, philosophies and business processes to enable the leanest manufacturing.

And behind TPS is information technology—supporting and enabling the business processes that help Toyota eliminate waste, operate with virtually no inventory and continually improve production.

Technology does not drive business processes at Toyota. The Toyota Production System does. However, technology plays a critical role by supporting, enabling and bringing to life on a mass scale the processes derived by adhering to TPS.

"What strikes me about Toyota is, if you were to ask them if they have a technology strategy, they would probably say no, we have a business strategy," says Philip Evans, a senior vice president at the Boston Consulting Group who has studied Toyota. "They have a very clear understanding of the role technology plays in supporting the business."

Every organization strives to make its business processes more effective, more efficient and more capable of adapting to an ever-changing environment. In fact, business process management (BPM) was the top business priority expressed by companies in research firm Gartner's ranking of business and technology priorities for 2006. There are a number of definitions for BPM, and a whole category of software products to help companies improve their business processes, but the overriding premise is simple: BPM is about continuously identifying opportunities for improvement in a company's business activities and acting upon those opportunities.

Most companies will claim this goal, yet very few can hope to come close to achieving the same degree of success with BPM as Toyota. Its entire culture—its basic DNA—is built around continuously searching for better ways to improve its manufacturing and business processes, and ultimately achieve customer satisfaction. Information technology often plays the role of bringing those processes to life, be it using new software to shorten the cycle from accepting a customer order to having that Camry or Corolla roll off the production line, or monitoring equipment on the factory floor to prevent breakdowns and defects.

And the payoff is impossible to ignore. In 2003, Toyota overtook Ford Motor to become the world's second-largest automaker, with sales of 6.8 million vehicles, compared to Ford's 6.7 million. In 2006, Toyota forecasts that as many as 9 million vehicles will roll off its production lines, putting it a few bumpers away from General Motors, which is expected to produce about 9.2 million vehicles in 2006. In July, Toyota reported its best first-half sales in its 49 years in the U.S., selling 678,691 units.

By 2007, Toyota could unseat GM as the world's largest automaker, a title GM has held for almost a century. It long ago unseated Detroit's Big Three as the world's most profitable car maker.

"Many companies have tried to duplicate what Toyota has done with TPS... and most fail," notes Jeffrey Liker, a professor of industrial engineering at the University of Michigan and author of several books on lean manufacturing, including The Toyota Way. Liker has consulted with a number of companies implementing lean manufacturing techniques based on the Toyota model, and by his reckoning, "less than 1%" deserve an A or B+.

"It's hard work," Liker says. "You have to be willing to commit to practicing the concepts behind TPS every day."

NEXT PAGE: Creating the Lean Machine

Creating the Lean Machine

Unlike the formulas to blend Coca-Cola or the latest blockbuster drug, there is no veil of secrecy behind the Toyota Production System. In fact, Toyota openly invites general visitors and competitors alike into its plants to observe its operations and manufacturing techniques.

In 1992, it opened the Toyota Supplier Support Center in Erlanger, Ky., about an hour's drive north of the Georgetown plant, to teach other companies the principles and concepts behind TPS and to help implement TPS in their own operations. To date, it has worked with more than 100 companies as varied as office furniture maker Herman Miller, seat manufacturer Trim Masters and several hospitals. The supplier center now operates as an independent consulting firm.

It even created a joint venture with GM in 1982, taking a plant that was to be closed in Fremont, Calif., and reengineering it into a lean manufacturing facility based on TPS. That plant, renamed New United Motor Manufacturing Inc. (NUMMI), quickly surpassed all of GM's plants in North America in productivity, quality and inventory turns. NUMMI became a living laboratory for hundreds of GM executives and now manufactures Corollas, Tacoma pickup trucks and the Pontiac Vibe.

Toyota is open with the strategy behind TPS because it wants to raise its North American suppliers up to its own level of efficiency and quality, Liker says. At the same time, it can afford to be open with its competitors because Toyota is constantly raising the bar. By the time they copy its current processes, Toyota will have moved on.

The origins of TPS date to the turn of the last century, and a very different industry. Sakichi Toyoda, founder of the Toyota Group, invented a loom in 1902 that would automatically stop if any threads snapped. It paved the way for automated loom works, where a single operator could handle dozens of looms. Sakichi's invention reduced defects and raised yields since a loom would not continue producing imperfect fabric and use up thread needlessly. This process, of stopping production to prevent defects, became known as Jidoka.

In the 1930s, the Toyoda family became fascinated by Henry Ford's mass production system, and decided to set up an auto manufacturing operation of their own. The problem they faced is that while Ford's system was ideal for a market the size of North America, it could not be easily adapted to serve much smaller production volumes for a market the size of Japan. (A Ford factory line in the 1930s produced about 9,000 units per month, while Toyota was only producing about 900 units).

The solution was to create an assembly line where parts and supplies were purchased in only the quantities required to satisfy production requirements, and to match production as closely as possible with consumer demand. This limited the amount of cash that had to be committed to inventory, and also allowed Toyota to respond quickly to any defects or changes in demand. Production became dependent on a pull system, where inventory was "pulled" from suppliers only when required, instead of the more common "push" mass production system, where parts are produced in large quantities and stored in inventory until required. This pull method became what is now known as a just-in-time (JIT) supply chain system.

Together with the ability to stop production to prevent defects, Jidoka and just-in-time are the central pillars of TPS.

Over the years, Toyota refined a number of other concepts and production methods that support the two central TPS pillars. And behind each of those pillars are information systems, supporting and enabling the processes:

Just-in-time: Toyota employs one of the most sophisticated supply chain systems in manufacturing, working closely with suppliers to ensure that parts arrive just when needed. For example, when a car comes out of the paint shop in Georgetown, the system sends seat supplier Johnson Controls an electronic message detailing the exact configuration of the seats required (leather upholstery, bucket seats, etc.); Johnson Controls has four hours to ship those seats to the plant in the exact sequence required. The instructions are provided by Toyota's proprietary Assembly Line Control System (ALCS) software.

Jidoka: At every stage of the assembly line, Toyota employs devices allowing workers to stop production to correct defects. Such devices may be as simple as a rope strung above the assembly line, or a button that can be pushed. In other cases, it is sophisticated monitoring software such as Activplant's Performance Management System, which can alert operators to problems with equipment or robots in real time.

Kaizen: This is a system for continuous improvement. Toyota constantly looks to improve its business processes by finding ways to take Muda (waste) out of the system. It can be as simple as moving a tool to an assembly station so a worker does not need to waste time walking to get the tool. Or it may involve technology, such as allowing dealerships to swap car inventories using the Dealer Daily, an Internet portal, so customers are not left waiting longer for the vehicle they want.

Andons: Wherever possible, Toyota uses visual controls, or Andons, such as overhead displays, plasma screens and electronic dashboards to quickly convey the state of work. On the assembly line floor, for example, overhead Andons tell a supervisor with one glance whether the station is functioning smoothly (a green light), whether there is a problem being investigated (yellow light) or whether the assembly line has stopped (red light). Newer plasma screens, tied into assembly line equipment, provide even more information such as which machine malfunctioned, the operator and the exact conditions (speed, temperature) when it broke down.

PokaYokes: Toyota uses a range of these low-cost, highly reliable devices throughout its operations to prevent defects. A PokaYoke may be something as simple as a tool holder with an electronic sensor, or it may be a light curtain, a beam of light that sends a signal to a computer when a hand or some other object interrupts its flow. The curtain can signal a warning if, for instance, a worker fails to pick up a cotter pin, bolt, nut or some other required part.

Genchi Genbutsu: The literal translation of this term is, "Go and see for yourself." Rather than hear about a problem, Toyota requires its workers, team leaders and executives to go and see a problem directly and to work collectively on a solution. At least 50% of Toyota's information systems workers are stationed at plant sites to work directly with operations.

Together, the elements of TPS form the basis for a system of business process management that allows Toyota to continuously look for ways to optimize its operations and put thought into action. Sounds simple, but it requires a basic cultural change in an organization, and that, according to Gary Convis, can be the most difficult challenge. Convis, chairman of Toyota Motor Manufacturing Kentucky, oversees the company's manufacturing plant in Georgetown, Ky.

"Kaizen defines Toyota's basic approach to doing business," Convis says. "Challenge everything. The true value of continuous improvement is in creating an atmosphere of continuous learning and an environment that not only accepts, but actually embraces change."

Convis is a former Ford and General Motors executive who joined the NUMMI venture in California, and moved up through Toyota's manufacturing ranks. In 2001, Convis became the first North American to head a Toyota manufacturing plant when he was put in charge of the Georgetown facility. He responded to the promotion by moving his office from the administrative building adjacent to the Georgetown plant to the center of the factory floor. In June, he was promoted again to the role of chairman.

In a recent interview in Nikkei Business Online, Toyota Motor CIO Yoshikazu Amano noted the importance of information technology in Kaizen activities.

"At Toyota, the information systems department, and I as the CIO, have an absolute advantage when compared to other departments," he said. "The reason is that we manage all of the data from Toyota's global operations. I have that data at my fingertips.

"Looking at this data tells me a lot. For instance, in sales I can see that some sales companies are successful at selling new cars while others are good at selling used cars or service. I can also see the difference in profitability between these companies. In the area of logistics, I can see one department over here and another over there processing similar data, and that these departments may need to be reorganized and the transactions streamlined.

"Part of my job as CIO is to take these companywide issues and use this data to make improvement suggestions when I have an opportunity to meet with the managing executives."

Millie Marshall, vice president of information systems for Toyota Manufacturing North America, concurs. At Toyota, there is a clear understanding of technology's role and its place in the boardroom, she says, and that in turn helps the company in the area of BPM.

"In I.T., we know what the business changes are and the problems for every single area—whether it's accounting and finance on the administrative side, or whether it's something on the plant floor that requires some type of solution," she says. "Because I.T. can span and look at all of those areas, our top executives look to us to put forward recommendations and help them prioritize business projects."

Marshall, a Kentucky native, began working with Toyota in 1991, a few years after the automaker began transforming sleepy Scott County with its massive Georgetown plant. Marshall had been working in information systems for Square D, a company that manufactures electrical breakers and associated components. She was happy working for Square D, but couldn't help notice the "amazing" impact Toyota was having on her community. Marshall started at the Georgetown plant working on mainframe database administration, and for some time worked in human resources on its PeopleSoft ERP implementation, but the majority of her time has been spent managing systems for the factory floor.

Her first impressions of joining Toyota was that it was "overwhelming." The workload was extremely high, with new plants and expansions being brought on-stream every month, and it took time to get used to the Toyota culture. Management at Toyota was much more hands-on; they didn't hand you an assignment and go away, and it was expected that they would get their hands dirty as well. "I can remember sitting down with Japanese coordinators—these were high-ranking people—and we were going over actual data fields," she says. "They were sharing their knowledge and were very patient with me... but what I noticed is that they had intricate knowledge of how the system worked."

NEXT PAGE: Daily Dealings

Daily Dealings

A prime example of business process management and the Toyota Production System in action is Toyota's Dealer Daily Internet portal initiative. Toyota operates its North American operations under a holding company, Toyota Motor North America, headquartered in New York. Under that umbrella, it divides its operations primarily into sales and service, manufacturing, and design and R&D.

Toyota Motor Sales (TMS), based in Torrance, Calif., is responsible for the sales and marketing of vehicles in the U.S., and the relationship with Toyota car dealerships. In 1998, using the principles of Kaizen and BPM, it undertook a major project to replace a vehicle ordering and communications system for its roughly 1,200 U.S. Toyota and Lexus dealers with an Internet portal.

Under the old system, Toyota Motor Sales interacted with its dealers through the Toyota Dealer Network (TDN), a text-based application that ran on IBM AS/400 computers installed at each dealership. The system in turn accessed other applications running on a centralized mainframe at TMS headquarters in Torrance.

The 25-year-old system had numerous limitations and was expensive to maintain. TDN did not integrate with any of the applications used internally by the dealers to support their daily operations, such as selling, arranging financing and processing warranty claims. Some Toyota dealers also own other brands of vehicles, and use third-party applications from providers such as Automatic Data Processing, Reynolds and Reynolds, and Universal Computer Systems to run their operations. Again, TDN did not integrate with those applications, so information had to be re-keyed constantly.

In addition, whenever TDN needed to be upgraded, to fix a bug or add new features, Toyota Motor Sales had to create tapes and CDs, mail them to all 1,200 dealers and wait for the dealers to find the time to upgrade their systems. Toyota estimates the upgrade process cost more than $1 million a year alone.

The combined result, says Ken Goltara, vice president of automotive systems for TMS, was a whole lot of Muda—waste. Wasted time on re-keying data, wasted time on errors, wasted opportunities from not being able to serve the customer better, and wasted money.

Toyota began the portal initiative by mapping out its business processes, holding Kaizen workshops with its dealers, and systematically looking at all the areas where waste could be removed. And it didn't take the plunge without thinking long and hard about the possible repercussions. For starters, not everyone agreed with dumping the old system. "There's a certain comfort level with a system that's been in place for 25 years," Goltara says.

The Dealer Daily portal initiative took four years to develop, at an undisclosed cost, and was a partnership between Toyota's I.T. division, Microsoft Consulting Services, Dell Computer and WorldCom (now part of Verizon). It was built on top of Microsoft technologies, starting with the Windows Server System infrastructure, and incorporating SQL Server, Site Server and Microsoft Visual Studio development tools.

As with almost all of its technology implementations, Toyota started small, carefully rolling out the portal to its Lexus dealers as a test. While it worked out the bugs, it continually expanded the offering, eventually making it available to all 1,200 of its U.S. Lexus and Toyota dealers.

The key business process improvement is that the portal now allows dealership personnel to perform daily business activities, such as entering new vehicle orders and arranging financing or warranty claims, without keying data into multiple systems. Instead, staffers enter the information once into Dealer Daily, and the system automatically forwards the data for processing against the various applications from Toyota and third-party providers that also require the data. When a customer wants to finance a vehicle, for example, dealerships can submit a loan application to Toyota's financing system (which runs on an Oracle database), and receive a response in as little as 15 seconds. The quick response greatly increases the chances that Toyota will win the customer's financing business.

Dealer Daily also streamlines a number of other business processes, including allowing dealers to perform "virtual swaps"—essentially letting them swap cars being shipped from the plant, so they can meet customer orders faster. In the past, this wasn't possible until after a car actually arrived at the dealer's lot. Now, it can be completed before shipment and sometimes in transit, providing significant savings. Dealer Daily also serves as a storage site for vehicle service information, so customers can take their new Lexus GS Hybrids to any dealership, and know that there is a complete history of work performed in the past.

In all, the Dealer Daily incorporates more than 120 business applications, and like all Toyota initiatives, it is constantly undergoing Kaizen to look for more improvements and opportunities to remove Muda. Case in point: Toyota recently added the capability for dealers to find out which vehicles it has in the production pipeline, and make changes such as switching a cloth interior to leather. (Dealer Daily is integrated into Toyota's mainframe systems through file transfer protocol and System Network Architecture [SNA], IBM's proprietary networking architecture, although Web services are now being explored.) By logging in the next day, the dealer can find out if the changes were received in time and accepted. This allows the dealers to more closely customize orders to actual customer demand.

Using business intelligence tools from Hyperion Solutions, Toyota tracks the status of the more than 35,000 vehicles that may be in transit from ports or plants to dealerships, constantly looking for the most cost-effective transportation routes based on changing circumstances.

While no exact figures are available, Toyota says Dealer Daily saves the company and its dealers tens of millions of dollars. Toyota also surveyed 3,000 of its dealership employees and found that the average person who had been using the text-based system saved 1.8 hours per day by using Dealer Daily.

NEXT PAGE: A Car Every 20 Hours

A Car Every 20 Hours

In the world of lean manufacturing, the real magic takes place on the factory floor in Georgetown, a city of about 20,000 located 13 miles north of Lexington, Ky. Toyota's thrust into the land of the Big Three automakers sits off Cherry Blossom Way, just a few miles past a Wal-Mart, McDonald's and Applebee's.

One of the first things that strike you about the plant is how open, bright and airy it feels. There are no floor-to-ceiling shelves stocked with parts for the assembly line, but there is a constant buzz of vehicles and self-guided robotic carts shifting parts directly from loading docks or staging areas to the line. Little musical jingles are heard everywhere—they all seem to sound the same to visitors, but assembly line workers can tell just by the jingle if there's a problem at their workstation and what might be the cause.

One of the key ways Toyota transformed the world of automotive manufacturing, says the University of Michigan's Liker, is by introducing the concept of one-piece flow—a production technique competitors are still struggling to adopt.

In Henry Ford's world of mass production, processes are designed to produce components or parts in large quantities. In other words, bolts, gears, transmissions or seats are made in large quantities and pushed to the next stage of production, where they sit in inventory until needed. Mass production has significant benefits, as Ford proved. It can greatly lower the cost of producing individual parts or pieces, and workers become extremely proficient in a certain trade or skill.

But it also has its drawbacks. The first is the need to store and constantly shift inventory. The second is waste. If consumer demand suddenly shifts and there is no longer a demand for a certain vehicle or option, there may be thousands of units in the supply chain that are no longer needed. Also, if a part or component has a defect, that defect may not be discovered until some later point in production or after delivery, at which time thousands of units may have been produced.

The Georgetown facility was designed from the ground up to produce vehicles in a continuous flow. Once the body frame comes out of welding, it is loaded onto the overhead conveyor system to begin its journey through the plant. Each job on the assembly line is designed to be completed in exactly 55 seconds, the amount of time before the conveyor moves the vehicle to the next stage of the line. At one station, a worker sits on a floating chair that moves inside the car frame, allowing him to stuff in insulation, then moves him out again to wait for the next vehicle. At another station, the entire engine is lifted up into the car chassis and bolted into place by two workers who hardly break a sweat.

Everywhere in the facility, parts arrive from loading docks or staging areas, just-in-time to be installed in the exact car they have been configured for, from a red spoiler to power windows. Perhaps the most remarkable example of just-in-time, however, is the seat installation area. Here, seats arrive from a nearby Johnson Controls plant every four hours, in exactly the right sequence and format to match the car on the assembly line—be it beige leather bucket seats, or a fabric three-seater bench.

Coordinating this incredibly complex scheduling ballet is software, proprietarily developed by Toyota, which it refers to as its Assembly Line Control System (ALCS). The software went through a major redevelopment about five years ago, and was ported from a mainframe to a client/server system. Marshall says the reason for the refresh was to make the software more flexible so that it could run at a global-scale plant like Georgetown, or at a smaller-scale plant like the one it operates in Thailand. Georgetown now uses a combination of Hewlett-Packard and Windows 2000 servers to host the application. The software essentially controls the sequencing of parts with the assembly process, ensuring that the exact components, such as black leather seats or power windows, meet up with exactly the right vehicle on the line.

Another major piece of software in use on the factory floor is a monitoring system from Activplant, based in London, Ontario. The software, called Activplant Performance Management System, essentially monitors all of the various machines, robots and computerized devices on the factory floor, keeping track of things such as malfunctions, uptime and reliability. The software collects information via programmable logic controller (PLC) devices, essentially small computers used to program and control factory machines and robots.

The Activplant system can tell Toyota, for example, who the operator of the equipment was at the time it broke down, what the conditions were, speed of operation, temperature and the downstream effects on the assembly line. The advantage, according to Marshall, is that it provides Toyota with live data so the automaker can act faster to prevent assembly line disruptions, and drill down to investigate causes and effects. In terms of business process management, it can provide Toyota with key insights into factors such as which equipment tends to cause the greatest disruption to the assembly line, so it can prioritize new capital investments.

The most time-intensive part of the vehicle assembly process—almost half of the total—is spent in the paint shop. Until recently, this was one area where Toyota was stymied in its attempts to maximize business processes and achieve one-process flow. That's because it had been difficult to paint a white or red car after a black car. Every last drop of black paint had to be removed from the tubes of the paint-spraying robots with solvents. For that reason, Toyota had to paint vehicles in batches—the mass production way, and contrary to the tenets of TPS.

But where other manufacturers might have accepted painting in batches as a fact that could not be altered, Toyota did not. TPS required that it constantly look for ways to overcome Muda. Toyota formed a partnership with ABB Automation Technologies, a Zurich-based maker of manufacturing robots, to pioneer a painting system that uses swappable cartridges. In 1999, it began installing the technology in its plants worldwide.

Now, when a car enters the paint shop, the ALCS tells the painting robot the exact color required; the robot grabs a red cartridge for a red car, or a blue cartridge for a car to be painted blue. Cleaning with solvents is no longer necessary. Toyota estimates the process saves about $29 per vehicle, and takes 2.1 hours off the time needed to produce a vehicle. At Georgetown, it was able to mothball one of three painting booths because of the more efficient process.

NEXT PAGE: Culture Cure

Culture Cure

As Convis notes, achieving business process management success in the vein of the Toyota Production System requires cultural change within a company. At Toyota, that is achieved by leading through example.

Marshall recalls a situation when the information services department was responsible for a serious disruption in operations on the plant floor. There was a breakdown in the kanban system, a method of issuing a parts order that is a component of Toyota's "pull" just-in-time inventory system. At one time, parts were pulled using kanban cards—actual cards that were sent to inventory staging areas or faxed to suppliers—but now such pull signals are delivered through various forms of electronic messaging such as eXtensible Markup Language (XML)-based technologies.

When the problem was detected on a Monday morning, team leaders met in a war room, essentially a conference room, to map out exactly what had happened, the various systems involved and the likely cause. In the end, it was determined that a large database that was supposed to have been backed up over the weekend, wasn't. The individual responsible ran the backup, but didn't check to ensure it was completed. Determining the cause might have taken longer, but the individual stepped up and admitted not having checked that the backup had run properly.

Marshall says at other companies, a worker might have been afraid to step forward—shutting down the assembly line is a serious error—but Toyota strives to make sure that workers will not be punished for bringing errors, defects or problems to the surface. As a result, Marshall says the department put more countermeasures in place—the technology version of PokaYokes—to ensure the database backup is run and checked properly.

"Everybody feels bad when you impact the business. But we don't talk about appointing blame or whose fault it is here," Marshall says. "If people think there are going to be consequences when they uncover a problem and pull the Andon cord [a cord that stops production on the assembly line], they won't pull it, and we won't uncover the problem."

It's a philosophy that could serve Toyota well in the years to come.

NEXT PAGE: Roadblock Ahead

Roadblock Ahead

Despite its success, Toyota is not immune to some of the problems that plague other auto manufacturers. Auto recall filings in Japan surged to a record in 2004 and were only slightly lower in 2005. Toyota itself has been stung in recent months by a string of embarrassing recalls and a police investigation in Japan that could have deep repercussions.

A Japanese police investigation in July found that Toyota had continued using a steering mechanism in its Hilux Surf vehicle without testing its safety, even though the vehicle was remodeled, placing extra weight on the vehicle's front wheels. Police believe this led to a series of breakdowns, and is suspected in a head-on crash that injured five people.

The investigation, which led the Japanese transportation ministry to issue a "guidance" order requiring Toyota to report steps it is taking to better monitor defects, comes at a time when the company has issued a record number of recalls. In July alone, it issued recalls for 420,000 vehicles globally over faulty engine parts, as well as recalls for 370,000 Toyota Highlander and Lexus SUVs over a defective clip that could cause a console panel to fall, and for 160,000 Tundra pickups to remove a passenger-side airbag shut-off switch. In one month, it issued recalls for almost as many vehicles as it did for all of 2004.

Toyota officials have openly acknowledged that the company's rapid growth, and its increasing reliance on plants around the globe, has strained its ability to maintain a gold-standard quality record. At a news conference in July, Toyota president Katsuaki Watanabe bowed deeply and apologized for the recall troubles.

"I take this seriously and see it as a crisis," Watanabe said at the conference. "I want to apologize deeply for the troubles we have caused."

Toyota may be going through a rough patch, but industry experts say the recall issue has to be viewed in context. Toyota's quality record is still tops in the business; in June, Toyota and Lexus captured 11 of 19 initial-quality awards handed out by industry watchdog J.D. Power & Associates. They just happen to be in the glare of the spotlight.

"They're the guys wearing the yellow jersey, so everyone's watching them," says James Womack, chairman of the Lean Enterprise Institute, a Cambridge, Mass., non-profit think tank dedicated to expanding the principles of lean manufacturing.

Womack believes Toyota officials are losing a lot of sleep over the recall issue and will redouble their efforts to have all employees follow the tenets of TPS. "I've been watching these guys for a long time, and they worry more than any group of people I've ever seen," he says.

"You can bet they're poring over their business processes to look for weaknesses. I'd also be willing to place a pretty high bet that Toyota will be able to come up with answers."

NEXT PAGE: Toyota Motor: Base Case

Toyota Motor: Base Case

Headquarters: 1 Toyota-Cho, Toyota City, ACH 471-8571, Japan
Phone: (81) 565-282121
Business: The second-largest automotive manufacturer in the
world by unit output, and largest by market capitalization and
profits.
Chairman: Fujio Cho
Chairman, Toyota Motor Manufacturing Kentucky: Gary Convis
Financials in 2005: $180 billion in revenue; $12 billion in profit;
profit margin 19%.
Challenges: Continue global expansion without sacrificing quality
or principles of the Toyota Production System.

BASELINE GOALS

Unseat General Motors as the world's largest automaker by increasing global production capacity from 8.2 million vehicles in 2005 to 10 million by 2010.
Reduce defects and recalls, which hit more than 2 million through July 2006, back to annual norms of less than 1 million.
Reduce the time it takes to assemble parts and manufacture a vehicle from 31 hours in 2001 to 28 hours by 2007.
Increase global production of hybrid vehicles from about 300,000 in 2006 to 1 million by 2010.

Toyota Player Roster
September 5, 2006

Millie Marshall
VP, Information Systems, Toyota Manufacturing North America
The Kentucky native is responsible for the information systems that support all of Toyota's engineering and manufacturing operations in North America. Toyota's aim with information technology, she says, is to support and enable the business processes that are put in place by following the Toyota Production System (TPS), a set of principles and strategies that guide the company.

Katsuaki Watanabe
President, Toyota Motor
Responsible for the day-to-day operations of the auto manufacturer. Watanabe's concern these days is how to increase production to overtake General Motors, while at the same time maintaining Toyota's stellar quality record. The company had to issue recalls for more than a million vehicles in July alone. Toyota believes the guidelines and principles behind TPS, which include stopping production to fix a defect as soon as one is discovered, are its best strategy to regain consumer confidence.

Gary Convis
Chairman, Toyota Motor Manufacturing Kentucky
A former Ford and GM executive, Convis joined a joint venture between Toyota and GM in California, New United Motor Manufacturing Inc. (NUMMI), in 1984; this became the first North American plant operating under TPS. He gradually moved up through the ranks and in 2001 became the first North American to head a Toyota manufacturing plant—the Georgetown, Ky., facility.

Yoshikazu Amano
CIO, Toyota Motor
Amano oversees Toyota's global information technology efforts. He says he's able to bring to the boardroom all of the data from the company's global operations. His responsibility is to use that data to help executives understand and prioritize companywide issues.

Barbra Cooper
VP and CIO, Toyota Motor Sales
Cooper is Marshall's counterpoint on the sales end of Toyota's U.S. operations. She joined Toyota in 1996 as vice president of information systems, following similar roles at MicroAge and American Express. One of her biggest accomplishments has been to overhaul an antiquated dealership communications system with a Web portal.

OUTSIDERS

Kelly Thomas
Senior VP, Automotive, i2 Technologies
Thomas was involved in the early negotiations with Toyota to use i2's Demand Planner software to forecast the demand for parts and accessories from dealerships. Thomas says getting the company's software into Toyota was a long, challenging process, but now that it is in, i2 aims to move more of Toyota's operations onto its platform and away from proprietary systems.

Ted Williams
CEO, Activplant
The former Computer Associates executive recently took over the reins of the London, Ontario, company, which provides software to monitor a wide range of factory robots, machines and equipment. Like most Toyota suppliers, Williams says Activplant started off small, getting its systems into one Toyota plant, and gradually expanded to plants in the U.S., Europe and Australia.

John Fikany
General Manager, Microsoft Automotive
Fikany has been the point man between Microsoft and Toyota on several key projects, including its dealership portal, and is spearheading a new virtual vehicle design platform from Dassault Systemes and Microsoft being deployed at Toyota.

Toyota: A Tough Tech Customer
September 5, 2006

By Mel Duvall
Kelly Thomas will never forget his first face-to-face meeting with Toyota's senior officials.

It was 1999, and the head of the automotive division of i2 Technologies had been invited to Nagoya, Japan, to perform some consulting work around the area of production planning. He met privately with the project lead and spent two hours discussing lines of communication and responsibilities.

"I thought we were done," he recalls. But instead, the project lead took Thomas into a boardroom with other Toyota executives, where they spent another six hours discussing responsibilities and mapping out, on a whiteboard, lines of communication between i2 and Toyota officials. "I remember thinking at the time, 'This is going to be painful,'" Thomas says, referring to the fact that if Toyota was this thorough about setting out lines of communication, it was probably going to go over every other aspect of the project in minute detail.

Technology vendors and suppliers to Toyota all seem to agree on one point: The automotive company can be a difficult, challenging and uncompromising partner. Difficult in the sense that it is very meticulous in the way it implements new technology, spending much longer than most organizations evaluating systems before coming to a decision. And challenging in that it demands that the software or technology be flexible and adapt, often by customizing the code, to its business processes, and not the other way around.

But they also agree on two other points: The planning Toyota insists upon and its careful, well-thought-out implementation strategies are a big factor in its success; and the knowledge to be gained by working with Toyota and the prestige of having it as a customer are well worth the pain.

"In any large project, there are going to be peaks and valleys," Thomas says. "With other companies, when you enter the valleys, there tends to be a lot of finger-pointing. But that was never the case with Toyota. As it turned out, a lot of that initial planning—mapping out lines of communication and responsibilities—kept the project together and running smoothly."

The consulting project with i2, in fact, led to an even larger prize: Toyota implemented i2's Demand Planner software in its North American operations to predict demand and set inventory levels for more than 100,000 service parts and accessories.

Activplant, which supplied Toyota with software and systems to monitor its plant machinery, says getting into Toyota can be a long, challenging road. Activplant began negotiating with Toyota in late 2001 to test its software in a small pilot. It took 12 months to iron out the details and deploy the pilot; then Toyota spent another 12 months evaluating the results. Eventually, the automaker agreed to deploy in a single facility, and as it became further convinced of the software's merits, it expanded to other plants. Today, Activplant is deployed in five facilities, including the Georgetown, Ky., assembly plant where it monitors some 3,500 machines and robots.

"Toyota takes a very methodical approach to analysis and selection of software and technology," says Activplant chief executive Ted Williams. "They don't overreact . . . they have a philosophy of making decisions slowly, through consensus."

Toyota admits it can be a difficult company to work with, but it makes no apologies.

"We know that at times it can be a very frustrating experience for companies who aren't used to working with us," says Millie Marshall, vice president of information systems for Toyota Manufacturing North America. "But we like to think we give back a lot to our vendors. We try to grow with our vendors, and teach them our methods for problem solving and how Toyota does business."

Base Technologies: It's Proprietary
September 5, 2006

Toyota primarily uses proprietary applications to run its manufacturing operations, and technology from outside vendors to manage the business. Its preference is to standardize on one technology to eliminate Muda (waste).

APPLICATION	PRODUCT	SUPPLIER
Complete suite of enterprise software (U.S. operations)	Oracle/PeopleSoft ERP	Oracle/PeopleSoft
Database for ERP	Oracle 9i	Oracle
CRM	Siebel for Automotive	Siebel/Oracle
Business intelligence	SAS Business Intelligence	SAS
Business intelligence	Hyperion Intelligence	Hyperion Solutions
Business intelligence	PowerPlay, Impromptu	Cognos
Application integration	Tibco BusinessWorks	Tibco Software
Service-oriented architecture	WebLogic	BEA Systems
Parts and accessories forecasting	Demand Planner	i2 Technologies
Plant monitoring system	Activplant Performance Management System	Activplant
Plant scheduling system	Assembly Line Control System	Toyota proprietary
Dealer Daily vehicle ordering system	Windows Internet Server System	Microsoft
Dealer Daily database	SQL Server 2000 Enterprise Edition	Microsoft
Dealer Daily hardware	Dell 2450, 6450,8450 servers	Dell
Desktop and server applications	Office suite, Windows Server System	Microsoft
Antivirus	Norton, Trend Micro	Symantec,Trend Micro
Mobile messaging	BlackBerry Enterprise Server	Research In Motion
Dealership terminals	Citrix WinFrame and MetaFrame	Citrix Systems

Planner: Calculate the Cost of a Lean Production System
September 5, 2006

By Sean Nolan
Lean. Just-in-Time. Kaizen. By whatever name, your large consumer electronics company could use some of the efficiency evangelizing that seems to be pushing your competitors' profit margins past yours.

For this project, then, your goal will be to implement the principles of a lean production system and, ultimately, retool the way every unit in your company drives your products forward. The "Lean" philosophy—grounded heavily in principles first defined decades ago under the Toyota Production System—has a proven track record of quickly delivering results through a templated, unit-by-unit rollout that gains momentum as it spreads.

Outside help will be the key to translating Lean's theories into tangible results like speedier inventory turns and reduced waste. In the first year, you'll pilot this project with two manufacturing plants and all of the business units that support them, from assembly technicians to corporate planners.

Where to start? First, create a sense of urgency across the entire company, says Jerry Feingold of Continuous Improvement Consultancy in Ventura, Calif. Improving efficiency is essential in today's market, and your employees need to understand the urgency to improve—and the team-based approach that will make that happen.

Next, pick your most troubled business unit—for example, the packaging end of your manufacturing line—and turn the experts loose. Within 10 days they'll have process-mapped every corner of the unit and identified—and implemented—dozens of improvements, big and small, from faster setup times to smarter workstations to better machinery. Then move onto the next unit, pushing changes group by group, and watch as the business units start to pull in the efficiencies on their own in the "grassfire" approach that is the signature of Lean's contagious improvements, says Richard Ligus, president of Rockford Consulting Group in Rockford, Ill.

Your investment will include training, consultants and the purchase of more efficient manufacturing equipment. Technology costs will be small-scale, although you will need to streamline inefficient business applications—for example, the supply chain management application that currently requires a little too many redundant data entries.

Return on investment—through such areas as delivery times, reduced product defects and shorter production cycles—comes in as little as six months. But the real return is Lean's sustaining, self-perpetuating system of constantly refining and improving your enterprise. "Lean is not a 'get results at any cost' philosophy," Feingold says. "Improving processes is what improves results."

To see the details behind this Planner and fill in your own estimates, click on the "Get the Tool" icon above and download the interactive worksheet.

Portland firm adds Lean muscle

2006-09-03T00:59:00.000+08:00

Data company RDD beefs up under a Japanese system of efficiency
Tuesday, August 29, 2006
JONATHAN BRINCKMAN
The Oregonian

John Stepleton, owner of Portland-based Research Data Design, has done the explosive-growth thing. It almost killed his company.

Now Stepleton has replaced undisciplined growth with a different goal: efficiency. To get there, he's applying the principles of Lean, a production system developed to help manufacturing companies.

That's unusual because Research Data Design, known as RDD, is a service company. Rather than making widgets, the 12-year-old company produces data. Its factories: a focus group center in Portland -- complete with a conference room that can be viewed by researchers behind a one-way mirror -- and three call centers in Colorado, New Mexico and Montana.

"I realized after taking the company to the verge of bankruptcy we needed to try something different," Stepleton said. "Lean is the next step in moving things forward again."

Based on a Japanese production system pioneered by Toyota, Lean features two key concepts: "Just in time delivery," in which nothing is kept in inventory and parts are made as they are needed; and "continuous improvement," in which workers continually look for ways to raise quality and cut production time.

The Lean system is now a stalwart of U.S. manufacturers seeking to hold their own against low-cost overseas competitors. However, it's rarely used in the service industry.

"We're very, very early on the curve" of using Lean in service sector, said Steve Bell, president of Steady Improvement, a Portland Lean manufacturing consulting firm. "If you walk into any manufacturing organization you'll find them at least aware of the concepts of Lean, and perhaps beginning the journey.

"But walk into a service organization and most aren't even aware of Lean."

Stepleton heard about Lean in 2004, the year his company took its first big stumble. Founded in 1994 with 15 part-time employees, RDD grew quickly. Annual revenues of $454,000 after the first year of operation grew to $9 million a decade later.

The company had four call centers and about 400 employees entering its 10th year. Then, for the first time, RDD began losing money. Stepleton took drastic action to ward off bankruptcy, laying off 30 percent of his employees and closing two call centers.

"We had grown too fast without any structure, without any discipline," Stepleton said.

In mid-2005 he learned about Lean through the Portland chapter of EO, which stands for Entrepreneurs Organization. EO, with 6,400 members in 41 countries, helps entrepreneurs "learn and grow."

Lean opened his eyes to a different business approach. "Part of maturing is being more patient," Stepleton said. "It's investing for the future. That's a huge fundamental of Lean." Improved efficiencies, he said, help him keep call centers in the United States instead of overseas.

Stepleton retained Mike Martyn of SISU Consulting, a member of the Portland EO chapter, to bring Lean to his company. That effort to root out inefficiencies began early this year.

It was a difficult process.

Lean, said Martyn, can more easily spot waste in manufacturing firms, where piles of scrap metal beside a production line, for example, can indicate problems. In service industries, production is less tangible.

"You are looking at setting standards for your system, looking at when you aren't meeting those standards, and going after the root causes of the problems that keep you from meeting those standards," Martyn said.

"Your goal is to permanently solve the problem."

In RDD's case, the first step was making production problems visible. The company uses fairly low-paid workers -- average pay is $9.50 an hour in salary and commissions -- to gather data, mainly by telephone, for research studies. Martyn needed a way of measuring productivity so glitches would be obvious.

Each call center is organized with about 15 callers, or "research associates," overseen by a supervisor, or "coach." Martyn devised a system of metrics, or measurements.

Data is now compiled for each team: "RPH," or revenue per hour, measures how much money each team makes per hour, based on time spent on each study. "Run" measures the research associate turnover rate, or how long people stay on the job. Another measurement is the cost of labor as a percentage of revenue. The lower, the better.

Early numbers were dismal.

Under Martyn's guidance, visual systems were established to help research associates increase their productivity by reaching the right kind of respondents. Each research associate, for example, has within reach a dial that is turned to indicate a respondent's political affiliation. The associate also has a two-sided sheet to indicate the sex of the person: blue for male, pink for female.

Boards attached to the wall show, for each survey being done, how close to quota the company is for people in various categories. If they've met the quota for a particular category, the caller can end unneeded interviews.

"It seems like it's simplistic, but that's what makes it work," said Christian Byrd, a coach at the Missoula, Mont., call center who supervises 15 research associates.

Gerianne Schmidgall, a site manager at the Montana center, said the visual system makes the job easier for research associates, and increases their commissions.

"I was around before we started using some of these visuals, and we were constantly going over quota," Schmidgall said. "We were doing work that's not needed, and that's a waste."

John Fries, a senior project director for Alan Newman Research of Richmond, Va., is a customer of RDD. Fries' company designs surveys for customers, including advertising and government agencies. He uses RDD to collect data over the telephone.

RDD's use of Lean makes it much better at doing work quickly or changing a job in midstream than another data collection firm Fries uses, he said.

"We have a lot more flexibility using John's shop than with our other call center," Fries said. "We're impressed by measurements they are doing, down to the efficiency of each interviewer."

RDD still wants to grow, Stepleton said, but in a controlled way. "Part of maturing is being more patient," Stepleton said. "That's a huge fundamental of Lean."

Lean Barrier Busting

2006-09-03T00:05:00.000+08:00

by Austin Weber
September 1, 2006

George W. Bush probably won’t be making an appearance at this month’s Assembly Technology Expo in Rosemont, IL. But, by attending the event, you can find out something that he already knows: Lean manufacturing really works.

When the president recently visited the Allen-Edmonds shoe factory in Port Washington, WI, he lauded the small company for its ability to compete successfully in today’s global economy. At a time when 98 percent of all American footwear is imported, Allen-Edmonds Shoe Corp. churns out world-class products at its 23,000-square-foot plant in Port Washington, a picturesque town 20 miles north of Milwaukee.

During his visit, President Bush got a firsthand look at how lean manufacturing has enabled Allen-Edmonds to continue handcrafting premium men’s footwear in the United States. In 2003, the company invested $1.5 million to convert to a lean manufacturing system, purchase new equipment, change the factory layout, implement rigorous quality processes and develop comprehensive training programs. As a result, productivity increased 30 percent, damage rates declined 25 percent and inventory was reduced by nearly 60 percent.

Jim Kass, director of operations and the architect behind Allen-Edmonds’ lean system, will be participating in the Lean Barrier Busting session at this year’s ATExpo. The 3-hour session on Tuesday, Sept. 26, from 10 a.m. to 1 p.m., is organized by ASSEMBLY magazine. It will offer insight on several lean manufacturing success stories.

Other participants will include Joe Blanck, vice president of operations, strategy and manufacturing excellence at Schneider Electric (Palatine, IL); Tim Corcoran, vice president of ZF Sales & Service North America (Vernon Hills, IL); and Jamie Flinchbaugh, partner in the Lean Learning Center (Novi, MI) and author of ASSEMBLY’s monthly “Leading Lean” column. The event will also feature a panel discussion and Q&A session.

Kass integrated lean concepts such as just-in-time production, cellular manufacturing and the Toyota Production System into his company. During the conversion process, plant floor space was consolidated and the supply chain was overhauled. Allen-Edmonds’ production paradigm shifted from a traditional make-to-stock philosophy to a make-to order system, which reduced the cost of managing a massive inventory of finished goods.

Each pair of shoes is handcrafted in a process that includes more than 200 production steps. During the lean conversion process, Kass and his colleagues ensured that the company’s 8 decades of shoemaking tradition would remain intact.

Allen-Edmonds invested heavily in training and change management programs. Other expenditures included installing a new lighting system and machinery. Some existing production equipment was enhanced and modified by in-house engineers.

Key performance data were collected to track the new lean system’s effectiveness. “We made it a top priority to collect the right data,” says Kass. “The numbers culminate in a 15 percent decrease in direct labor and overhead costs.” Allen-Edmonds had its best year ever in 2005, which the privately held company attributes to lean manufacturing.

“Quality is the cornerstone of our brand,” notes Kass. “Lean manufacturing makes quality our No. 1 focus by improving efficiencies, productivity and profitability. By manufacturing shoes in the United States, Allen-Edmonds is able to produce superior quality footwear and provide the outstanding customer service for which the company has been renowned for the past 84 years.”

Achieving Cost Reductions

Schneider Electric’s North American operating division has used lean manufacturing principles to significantly reduce its manufacturing costs in Canada, Mexico and the United States. Since 2001, the company has saved more than $237 million.

Schneider Electric is a leading manufacturer of equipment used for electrical distribution and industrial automation and control. Its product line includes circuit breakers, relays, safety switches, sensors, terminal blocks and transformers. Schneider Electric is based in France, but has nearly two dozen assembly plants in North America.

The company defines lean as “an initiative aimed at eliminating all waste in the manufacturing process. Its goal is to use less human effort, less inventory and less time to make products in less space.” By harnessing lean manufacturing, the company aims to be highly responsive to customer demands, while producing top-quality products in the most efficient and economical manner possible.

Schneider Electric focuses on three main customer-driven variables: cycle time, on-time delivery and product quality. According to Blanck, cycle time refers to the time it takes a product to be ordered by a customer, assembled by the manufacturer, and then shipped to the customer. “When the cycle is shortened, customers find the experience increases their trust in the manufacturer,” says Blanck.

Several years ago, Schneider Electric launched a new logistics strategy aimed at shortening cycle times. “This action reduced the time and transportation costs to reach our customers,” says Blanck.

On-time delivery guarantees that a customer’s deadline will be met each and every time. “When deliveries occur on time, customers are satisfied and trust they will have the same experience on their next order,” explains Blanck. “When on-time deliveries are not met, costs are incurred throughout the entire supply chain.”

For instance, valuable time is spent calling people on the telephone, sending and receiving e-mail messages, checking records, and checking loading docks and stocking locations. “The bottom line is that none of the activity is adding value,” Blanck points out.

Product quality at Schneider Electric comes from customers demanding the highest quality product available. “The better the quality of the product manufactured, the less cost is incurred to everyone,” claims Blanck. “Product quality is not just about meeting product specifications. It goes beyond that to anticipating and meeting customers’ needs.”

Another way to reduce manufacturing costs is by addressing plant safety issues and concerns. Last year, Schneider Electric reduced its medical incident rate by 33 percent across all of its North American facilities, which encompass more than 17,000 employees.

Playing by the Rules

ZF North America has standardized best practices throughout its production facilities and improved communication flow on the plant floor. The company is a leading manufacturer of automotive transmission, chassis and driveline components. Its product line includes actuators, clutches, differentials, steering systems and suspensions. ZF is based in Germany, but has more than 20 manufacturing sites in North America.

The company’s sales and service organization began searching for a lean initiative in 1999. “One of the things that prompted the search was our inability to keep pace with pockets of improvement year over year,” says Corcoran. After 3 years, “there was good acceptance, but nothing sank in,” Corcoran points out. In 2002, the organization took a different course of action.

After attending a lean leadership boot camp, Corcoran decided to take a fresh look at his company’s lean strategy. “We were missing important pieces, without which we couldn’t see the big picture,” notes Corcoran. “Lean tools are just the beginning. You also have to know how and why to use them.”

During the next 14 months, ZF employees began deploying new lean methods. But, something was still missing. “That something was an integrated approach and the leadership it takes to direct it,” says Corcoran. “This is when things really started taking off for us.”

Despite the early twists and turns, ZF’s lean journey has been paved with real success, thanks to integrated lean thinking and a totally new way of looking at things.

“When it came to evaluating concepts and tasks, we had to shake ourselves free of the past habits and start completely from scratch,” says Corcoran. “But, it’s paying off on many fronts.

“By structuring our activities; clearly connecting customers and suppliers; understanding and simplifying flows, and improving upon them by experimenting at the lowest possible levels, we cut about 1,000 different processes down to about 300,” adds Corcoran. “The self-assessment and optimization process has become very important for increasing customer satisfaction, motivating staff and optimizing our work.”

Last year, Corcoran and his team identified 122 areas for improvement in nine major target areas. “Our quality policy used to be 50 pages long and was cryptic at best,” notes Corcoran. “Today, it is easy to read, meets all ISO requirements, is fully integrated into our operating system and fits on four pages.

“We’ve come a long way in a relatively short amount of time,” Corcoran points out. “We’re an organization with a shared vision, working within a structure of simple, yet optimized activities and processes. For us, lean is the only game in town.”

Common Lean Pitfalls

Lean success takes more than just doing things right. “It is also about avoiding pitfalls than can lead to failure,” says the Lean Learning Center’s Flinchbaugh. “Leaders must always be on the lookout for signs of lean failure, which can occur at any point in the lean transformation process.”

According to Flinchbaugh, there are five common lean pitfalls:

Believing lean is only about manufacturing.
Allowing the lean department to lead lean initiatives.
Confusing activity with productivity.
Focusing on event lean, which prevents a company from becoming genuinely lean.

Believing “hare lean” will beat “tortoise lean.”
Pitfall No. 1 often occurs because companies are not always focused on the right problems. “There seems to be three dominant reasons why people get stuck in the lean-equals-manufacturing mindset,” says Flinchbaugh.

“The first is that there is an abundance of media, books and training focused on ‘lean manufacturing,’” explains Flinchbaugh. “This has been perpetuated to such an extent that people wonder whether lean assembly will work in a machine shop. But, the machine shop is precisely where Toyota’s Taiichi Ohno conducted his first experiments and refined lean transformation.”

A second reason why people equate lean with manufacturing is that manufacturing is the most visible and measurable part of the organization. “It is easy to measure manufacturing,” says Flinchbaugh. “While often the wrong things are measured, every manufacturing manager has at least a dozen numbers he or she can recite to explain process performance. A manufacturing plant may make improvements to increase productivity, but that does not necessarily mean its controller has improved the efficiency of closing the company’s books.”

The third reason for this mindset is because most companies start their lean transformation on the plant floor, so all other functions immediately associate lean with manufacturing. “Other functional leaders see manufacturing’s efforts to break lean out of manufacturing as an attempt to encroach on their territory,” notes Flinchbaugh. He recalls one large company that changed the wording on training materials it used outside of manufacturing so that it would not appear to be manufacturing-based.

“When manufacturing does start to convince those outside of manufacturing that lean applies to them, it often takes the wrong approach, further complicating matters,” warns Flinchbaugh. “The use of ‘lean manufacturing in finance’ does not do anything to break down the wall. As lean is trained and communicated, the focus should not be just on manufacturing tools, such as andon cords and kanban cards. Lean rules and principles should be presented as the foundation that will apply to any process.”

To learn about the other four common lean pitfalls, and hear more about the success stories outlined above, be sure to attend the Lean Barrier Busting session at ATExpo, the world’s largest trade show for assembly tools and technology. It is attended by more than 12,000 manufacturing engineers, design engineers and plant managers from a wide variety of industries, including aerospace, appliance, automotive, consumer goods, electronics, industrial machinery, medical devices and telecommunications. ASSEMBLY is the official sponsor of the annual event.

A delicate balance

2006-09-02T23:35:00.000+08:00

Magazine Article, Source : The Manufacturer US
Zone : Logistics and supply chain
Published : 29 Aug 2006 21:48

Just-in-time delivery is the epitome of the efficient supply chain, but the expansion of global procurement makes it all the more challenging. Pamela H. Derringer reports

Will just-in-time make you just-too-late? Propelled by production optimization initiatives such as lean and six sigma, just-in-time has become the supply chain/inventory control mantra in recent years. And who could argue with a plan to have supplies and production perfectly synchronized with incoming orders, leaving minimal inventory? But with the huge manufacturing move to China and disruptions from Katrina, dock strikes and political instability in the Middle East, plus growing demand for product differentiation and customization, manufacturers are battling tougher expectations with a shrinking margin for error.

Despite the difficulties, top manufacturers remain committed to just-in-time and search for new insights and ways to balance the risks, according to Robert Ferrari, director of supply chain research for Manufacturing Insights, an IDC company. “They are still struggling but sticking with it,” Ferrari says. “Just-in-time is about creating an efficient supply chain but you need to adapt to customer requirements, and that subtracts from efficiencies. It’s a delicate balance.”

Manufacturers are striving to overcome global supply chain uncertainties by pursuing a more diversified global strategy, supplementing their main Chinese production centers with closer, quick turn-around plants in Mexico and South America, he says. The result is a mix of low-cost scheduled production (push) and supplemental production closer to North America in response to actual orders (pull), where the transportation lines are shorter and more reliable, he says. It’s not exactly pure-play just-in-time demand-driven supply chain, but it’s economical, flexible and responsive.

Manufacturers are also becoming more agile by mass producing and shipping semi-finished goods or components from mainland China and completing assembly and/or adding special features in Hong Kong or Taiwan, from where they can be sent air freight at reasonable cost in response to actual point-of-sale data, Ferrari says. However, the supply chain risks may increase as US discrete manufacturers now move main production operations to inland China where river transport will add uncertainty to delivery commitments, he warns.

After the West Coast dock strikes a couple of years ago, manufacturers also invested more in analytics and decision-making software to help them weigh risks and backup options of alternate supply strategies, as well as Web-based logistics software to track the whereabouts of goods en route. Specialized applications, such as Optiant or LogicTools, run on top of traditional supply chain software and optimize not only when and where production should occur (weighing different risk scenarios and refining the push/pull line) but also the timing and location of special fulfillment requirements such as customized packaging or other differentiation for specific markets.

Jonathan Colehower, CEO of Optiant, said companies also can reduce the risk of supply chain interruptions at the design level by increasing the use of common components in multiple products. “This consolidates your risk and creates a steadier pattern of demand,” he says. Optiant helps companies get closer to just-in-time inventory levels by modeling demand and lead-time variability across the entire supply chain to help them optimize production from different facilities, he adds. Most companies carry excess inventory because they set levels infrequently, cut them indiscriminately in an effort to be lean, and don’t adjust them for changes in demand, he says. Optiant, in contrast, helps companies adjust inventories weekly or even daily, making them much more responsive to demand, he says.

Procter & Gamble, now a $70 billion company with 70 different product supply chains, has gone beyond just-in-time and is creating an agile, demand-driven network that itself has become a growth engine, according to Keith Harrison, global product supply officer, at a recent supply chain conference. By collaborating closely with retailers over their promotions, and running on point-of-sale data instead of forecasts, P&G is optimizing shelf replenishment and, in turn, boosting sales, he says. The transformation, which is now more than 50 percent complete, required not only transparent flows of goods and information but a culture change in Procter & Gamble employees to focus externally on how their jobs affect the end consumer, Harrison adds.

Patrick Arlequeeuw, P&G’s vice president of global consumer driven supply network implementation, said the company’s new external focus of the past few years means that it strives foremost to “win with the customer” by responding quickly to changes in store demand rather than always maximizing plant profitability through batch production. Retail promotions can vary sales by 30 to 40 percent, so advance collaboration with retailers and rapid production adjustments based on point-of-sale data provide the highest long-run benefit for P&G, the stores and the consumer, he says. With this new end-consumer focus, P&G has halved its out-of-stock ratio from an industry average 10 percent to five percent, minimizing lost sales and enhancing future growth from repeat sales, he adds.

With transparent networks linking P&G with its suppliers and its retail customers, P&G demonstrates that just-in-time can, in fact, work, even on a global scale. However, Arlequeeuw, who is leading the redesign of P&G’s global supply chains, observes that there is more than one way to achieve quick response time, depending on the product and supply chain. Sometimes close physical proximity to the customer is best; other times, mass production followed by late-stage differentiation in the product or packaging is a better solution, he says. “You have to look end-to-end, how the supply chain moves and the product is used,” Arlequeeuw says. “The answer might be different but the principles, best practices and IT tools are the same. The goal is to make product supply and sales work together.”

Point-of-sale statistics are a great tool in helping manufacturers respond to customer demand, and even manufacturers who do not serve retail markets can still benefit from technology tools, to tailor production closer to demand while striving to maintain just-in-time inventories, concurred Ferrari.

TAL, one of the largest Chinese clothing manufacturers for top US brands, exemplifies the fine balancing act between low cost mass production on the mainland and quick responsiveness to changes in customer demand. Kirk Longo, vice president of supply chain for TAL’s US distribution division, said the company reserves several of its Chinese production lines for rapid special orders, which can be completed in as little as four hours, and then shipped by air freight. TAL can also ship quick-turnaround orders from a second plant in Mexico, he says.

In fact, TAL contends that its synchronization with suppliers and customers, all the way from customer input in designs to its advanced network, forecasting capabilities and shipping and logistics services have won it a competitive edge in a commoditized industry. TAL can manage all a retailer’s inventory, shipping and replenishing stock as needed from its own US warehouse, or transport it directly to individual stores based on point-of-sale data, Longo says. And it can even serve as a “one-stop-shop” for design, helping customers select fabrics, style and cut for new clothing. “It’s not only the location of our facilities and our ability to respond but our IT backbone—EDI, forecasting, ERP—that sets us apart from the competition,” he says.

Procter & Gamble and TAL have both relied on transparent supply networks, close collaboration and diverse manufacturing and transport options to support the ever-changing demands of their respective global markets. But sometimes even a big company such as P&G takes a direct hit, like Hurricane Katrina, which shut down two P&G coffee plants in New Orleans last summer, cutting its coffee production in half on Aug. 29. Aware of the flooding risks, P&G’s plants were located on high ground, but the company had no road access for 12 days and no phone or power for weeks. With its peak winter season approaching, quick resumption was critical.

According to Cath Malseed, P&G’s director of coffee supply, P&G’s strong corporate culture and long-term relationships with local officials were key factors in its quick recovery. The company opened up an alternative supply source in three weeks, shifted some production temporarily to other P&G plants, started up the main plant in mid-September and was operating both New Orleans plants at full capacity by mid-October, a mere month and a half after the hurricane. Along the way there were a multitude of major tasks, including finding all 550 employees, drilling a new well to provide water for the manufacturing processes, obtaining 130 trailers from FEMA for its employees and enlisting cooperation from local officials.

P&G’s new corporate culture, which empowered people to delegate work and make decisions during the crisis, was a critical factor in the quick recovery, said Malseed. “It all comes down to how people respond,” she adds. “You can be well prepared for an emergency and have a good contingency plan, but what counts are the decisions employees at all levels will make when they’re under pressure. P&G employees rose to the occasion because of our values and principles.”